On July 1, 2024, revised regulations governing federal student financial assistance programs became effective. The regulations, which can be found at 34 C.F.R. 668.23(d), require institutions that participate in the federal student assistance programs under Title IV of the Higher Education Act to provide annual financial reports to the U.S. Department of Education (ED or the Department). Additional guidance was released on Oct. 31, 2024 by Federal Student Aid, an office of the ED.[1]

One requirement of the revised regulation that may be relevant to certain institutions of higher education is the disclosure of all “related parties,”[2] including the relevant identifying information of such related parties, as defined by the FASB Accounting Standards Codification (ASC) 850, in their reports to ED.

ASC 850 defines a “related party” as follows:

a. Affiliates of the entity.

b. Entities for which investments in their equity securities would be required, absent the election of the fair value option under the Fair Value Option Subsection of Section 825-10-15, to be accounted for by the equity method by the investing entity.

c. Trusts for the benefit of employees, such as pension and profit-sharing trusts that are managed by or under the trusteeship of management.

d. Principal owners of the entity and members of their immediate families.

e. Management of the entity and members of their immediate families.

f. Other parties with which the entity may deal if one party controls or can significantly influence the management or operating policies of the other to an extent that one of the transacting parties might be prevented from fully pursuing its own separate interests.

g. Other parties that can significantly influence the management or operating policies of the transacting parties or that have an ownership interest in one of the transacting parties and can significantly influence the other to an extent that one or more of the transacting parties might be prevented from fully pursuing its own separate interests.

Although ED’s guidance issued in conjunction with the revised regulations states that “the related party disclosure requirement put into the regulations is not an expanded requirement, it has been the Department’s practice of requiring the level of detail now specified in the regulations,”[3] many institutions may not have been aware of such requirements. Federal Student Aid further clarified that the “the new regulations require institutions to include specific information on related party disclosures to clearly identify the related party being disclosed that had previously only been identified as possible information to include in the disclosure.” (emphasis added).

The institution must provide information that “include[s], but is not limited to, the name, location and a description of the related entity including the nature and amount of any transactions between the related party and the institution, financial or otherwise, regardless of when they occurred” (34 C.F.R. 668.23(d)(1)). With respect to higher education institutions, the ASC 850 definition of a “related party” could include a trustee, a high level administrator,[4] an immediate family member of such trustee or administrator, an affiliated entity or other parties (e.g., financial institution, insurance provider, contractor, professional service provider, etc.) with which the institution may deal depending on the level of control, influence or ownership between the parties. Additionally, if there are no related party transactions during the audited fiscal year or related party outstanding balances reported in the financial statements, a note must be added to the institution’s financial statements to disclose this fact.

The Department has provided a FAQ document that clarifies who might be a “related party” and provides examples of under what circumstances a report would be required.[5] For example, the guidance states:

Question: The institution’s president’s spouse established an endowment fund of $500,000 five years before the reporting year-end. The donor's relationship to the president and the president's relationship with the institution has not changed. Even though an endowment is a perpetual gift, there would be no related party disclosure in the current fiscal year because the contribution was made five years ago, correct?

Answer: It depends on whether the donor maintains any level of control over the endowment/donation/gift. For any period where control exists, it remains a related party transaction and must be reported.

Question: A trustee promises to give $700,000 over three years in the current reporting year. Under GAAP, nonprofit institutions recognize contribution revenue, with a time restriction (three-year promise) and a pledge receivable. In the current reporting period, the $700,000 promise will be disclosed: pledge receivable and restricted revenue. In subsequent reporting years the institution would report cash receipts on the pledge and the reduced receivable balance. In other words, the institution reports the reduced receivable balance and the cash receipts every reporting year until the pledge is fulfilled. Correct?

Answer: Yes. This would be reported in all three years as a related party transaction, as indicated in the example.

Question: Clarification is needed on the phrase found in 34 CFR 668.23(d)(1), “regardless of when the (related party) transaction occurred” and how it applies in the following example:

The provost’s adult daughter is the CEO of a financial institution that provided a line of credit to the college three years ago. The line of credit is a $1,000,000 liquidity facility that has not been drawn upon, but it is still available. The provost resigned last year, before the reporting period/fiscal year began. Is it correct that for the current reporting period, there is no related party disclosure because the provost is no longer employed by the college?

Answer: Yes, to the extent that the former provost has no association with the institution.

Question: If the provost was still employed by the college, the off-balance sheet line of credit facility would be disclosed along with the name and location of the related party (the provost’s adult daughter), correct?

Answer: Yes.

Despite the language of the ED guidance, it appears that the Department’s decision and subsequent FAQ document has at least made more explicit its requirement that institutions report any transactions between a trustee, administrator or the family members of a trustee or administrator, as well as a financial institution that has provided a current or future source of funds to the institution, as transactions between related parties. Moreover, Federal Student Aid’s guidance reinforces that:

[The Department] expects an institution to have a system of internal controls that is adequate to provide reasonable assurance about an institution’s compliance with the Department’s regulations, including the existence of related party relationships and transactions, as well as being able to identify the related parties. The institution’s internal controls must be sufficiently rigorous to provide for reasonable assurance that, when an institution’s financial statements include that it has disclosed all of its related party transactions or that it has no related party transactions, the disclosure is complete and accurate.

The revised regulations are in effect and will govern annual reports to ED concerning the use of their Title IV funds. Because there is still lingering uncertainty regarding the scope of disclosure, we recommend that institutions review their conflict of interest policies and consult with their accountants and legal counsel to assess current reporting practices and implement any additional procedures to ensure compliance.

If you have any questions or concerns related to disclosure requirements of institutions of higher education please contact Thomas W. Simcoe, Delaney M. R. Knapp or the attorney at the firm with whom you are regularly in contact.

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[1] Federal Student Aid, Disclosure of Related Party Transactions in Financial Statements (Oct. 31, 2024), available at: https://fsapartners.ed.gov/knowledge-center/library/electronic-announcements/2024-10-31/disclosure-related-party-transactions-financial-statements.

[2] Note that the regulations appear use “related party” and “related entity” interchangeably.

[3] U.S. Department of Education, Financial Responsibility Regulations—Questions and Answers FR-Q20 (Oct. 31, 2023), available at Financial Responsibility Regulations - Questions and Answers | U.S. Department of Education.

[4] ASC 850-10-20 defines “Management” as “Persons who are responsible for achieving the objectives of the entity and who have the authority to establish policies and make decisions by which those objectives are to be pursued. Management normally includes members of the board of directors, the chief executive officer, chief operating officer, vice presidents in charge of principal business functions (such as sales, administration, or finance), and other persons who perform similar policy making functions. Persons without formal titles also may be members of management.”

[5] U.S. Department of Education, Financial Responsibility Regulations—Questions and Answers (Oct. 31, 2023), available at Financial Responsibility Regulations - Questions and Answers | U.S. Department of Education.

New Title IX regulations became effective on August 1, 2024, and contain extensive requirements for colleges and universities that receive federal Title IV funds to provide accommodations for students who are pregnant or who have recently given birth.

Read More >> Accommodations for Pregnant and Parenting Students: New Rules, New Challenges

The U.S. Department of Education (ED) has announced a revised deadline for submitting required data under the Financial Value Transparency and Gainful Employment (FVT/GE) rules.

Read More >> ED Delays Financial Value Transparency and Gainful Employment Reporting

On Sept. 12, 2024, the U.S. Department of Education’s Office for Civil Rights (OCR) released two new resources aimed at helping schools (including colleges and universities) and school administrators comply with the 2024 amendments to the Title IX Regulations, which went into effect on Aug. 1, 2024. The resources explain how the 2024 Title IX Regulations clarify and update longstanding obligations related to Title IX coordinator duties, as well as prohibitions on sex discrimination based on pregnancy or related conditions and parental, family or marital status. These resources complement other previously released guidance documents and indicate OCR’s pointed attention to these issues. Below are some of the key points contained in each resource.[1]

The first resource, 2024 Title IX Regulations: Impact on Title IX Coordinator Duties, focuses on new and updated duties specific to Title IX Coordinators. The document addresses the following questions:

• What training must be provided to a Title IX Coordinator?
• How must a Title IX Coordinator monitor for barriers to reporting sex discrimination?
• What steps must a Title IX Coordinator take in response to possible sex discrimination?
• When is a Title IX Coordinator not required to respond?
• What actions must a Title IX Coordinator take with regard students who are pregnant or experiencing pregnancy-related conditions?
• What are the recordkeeping responsibilities related to a Title IX Coordinator’s role?

The second resource, 2024 Title IX Regulations, Nondiscrimination Based on Pregnancy or Related Conditions & Parental, Family, or Marital Status, clarifies prohibitions on sex discrimination on these bases for students, employees and applicants for admission or employment (collectively the “protected groups”).[2] Schools must not (1) discriminate against individuals in the protected groups based on pregnancy or related conditions; (2) treat those in the protected groups differently based on their parental, family or marital status; or (3) punish or retaliate against those in the protected groups for exercising a right under Title IX, such as seeking pregnancy-related leave or access to a lactation space.

In regard to applicants for admission and in addition to the above prohibitions, a school must not treat an applicant’s pregnancy or related conditions differently than any other temporary medical condition.

Concerning students, schools have additional duties under Title IX. Upon proper notice of a student’s pregnancy or related conditions, a school must take specific actions, such as providing reasonable modifications, allowing voluntary leave, reinstatement and/or access to a lactation space. The school must also tell the student about its responsibilities to pregnant students, including its obligations to respond to sex discrimination and limit sharing of private information, and provide the school’s notice of nondiscrimination. Schools are required to allow the student voluntary access to other parts of the school’s education program or activity that are separate and comparable to the general program or activity. Schools must also allow a student to take a voluntary leave of absence and be reinstated to the academic status and, as practicable, to the extracurricular status that the student held when the leave began. A school must also allow a student access to a lactation space. Notably, Title IX does not require a student to provide documentation of their pregnancy or related conditions for their school to take specific actions, unless doing so is necessary and reasonable to determine modifications or other steps. The resource includes information about (1) reasonable modifications, (2) the duration of a leave of absence and a student’s return, (3) participation in another portion of the school’s program, and (4) lactation spaces.

For employees, a school must treat pregnancy or related conditions the same as any other temporary medical condition for all job-related purposes. A school must also treat pregnancy or related conditions as a justification for a voluntary leave of absence without pay for a reasonable period of time if the school does not have an employee leave policy or if an employee has insufficient leave or accrued employment time to qualify for such a leave under the applicable policy. At the end of a voluntary leave of absence, the school must reinstate the employee to the status held when the leave began or to a comparable position without a decrease in the rate of compensation, loss of promotional opportunities, or any other right or privilege of employment. Additionally, a school must provide an employee reasonable break time to express breast milk or breastfeed and ensure access to a lactation space. Regarding marital status, a school cannot ask an applicant about their marital status during the hiring process.

Please note that as of Aug. 28, 2024, pursuant to federal court orders, OCR is currently enjoined from enforcing the 2024 Final Rule in certain states[3] and schools. Accordingly, the 2024 Final Rule and the recent guidance documents do not strictly apply in those states and schools, but may still be useful to help understand OCR’s enforcement priorities since the 2020 regulations contained similar prohibitions on sex-based discrimination.

On Sept. 18, 2024, Bond is hosting a complimentary Zoom webinar discussing pregnant students’ rights under Title IX Regulations and will be presented by attorneys Jane Sovern, Barbara Lee and Alison Roach.

If you would like access to the webinar or have questions about the material covered in this memorandum, please contact Christopher Cruz Sierra or any attorney in Bond’s higher education practice.

[1] This document is provided as general guidance and does not provide a comprehensive summary of the requirements of the 2024 Regulations. Institutions should confer with legal counsel to ensure full compliance with the law.

[2] Pregnancy or related conditions is defined as: (1) pregnancy, childbirth, termination of pregnancy or lactation; (2) medical conditions related to pregnancy, childbirth, termination of pregnancy or lactation; or (3) recovery from pregnancy, childbirth, termination of pregnancy, lactation or related medical conditions. Title IX also prohibits discrimination based on menstruation, perimenopause, menopause or their related conditions.

[3] Alabama, Alaska, Arkansas, Florida, Georgia, Idaho, Indiana, Iowa, Kansas, Kentucky, Louisiana, Mississippi, Missouri, Montana, Nebraska, North Dakota, Ohio, Oklahoma, South Carolina, South Dakota, Tennessee, Texas, Utah, Virginia, West Virginia and Wyoming.

This week, Gov. Kathy Hochul signed the Student Lifeline Act amending the New York Education Law to require that degree-granting higher education institutions educate students, faculty and staff about New York’s 9-8-8 Suicide and Crisis Lifeline.

Read More >> New York Requires 9-8-8 Suicide and Crisis Lifeline Information Shared and Added to College Student ID Card

Dear Higher Education Readers … The spring of 2024 not only brought with it the release of Season 3 of the Netflix blockbuster Bridgerton, but also the release of revised Title IX regulations.

Read More >> You Must Make Haste! The Deadline to Implement the 2024 Title IX Regulations is Fast Approaching . . . For Most IHEs!

Challenges to the rules of the National Collegiate Athletics Association (NCAA) have increased in recent years. The U.S. Supreme Court struck the NCAA’s rule against paying intercollegiate athletes for use of their name, image and likeness (NIL) in 2021.[1] The General Counsel of the National Labor Relations Board, a federal agency that regulates labor relations in the private sector, stated that intercollegiate athletes can be classified as employees and allowed them to attempt to unionize[2]—as the recent case involving Dartmouth College demonstrated.[3] The NCAA and several Division I athletic conferences recently settled a $2.8 billion lawsuit brought by former intercollegiate athletes who demanded payment for NIL usage that accrued prior to the Supreme Court’s 2021 ruling.[4] And on July 11, 2024, the U.S. Court of Appeals for the Third Circuit ruled that six intercollegiate athletes could maintain a lawsuit against the NCAA and the institutions they attended that claims that they are employees under the federal Fair Labor Standards Act (FLSA) and thus deserve pay for the time spent in athletics activities.[5]

The students, who had participated in one or more Division I sports (including football, baseball, swimming and diving, tennis, and soccer), claimed that the amount of control of their activities levied by their coaches, and the restrictions on how they spent their time while enrolled, meant that they met the requirements of the wage and hour law for employment protection. Thus, they claimed, they deserved at least minimum wage for the hours that they spent in these mandatory activities. The defendants disagreed, arguing that the students were amateur athletes, not professionals, and did not qualify for the protections of the FLSA. The defendants moved to have the case dismissed by the U.S. District Court for the Eastern District of Pennsylvania, but that court denied the motion, ruling that Division I intercollegiate athletes were analogous to unpaid interns.[6] That court analyzed the students’ claims under a test used by the U.S. Department of Labor for determining whether interns were entitled to pay under the  FLSA.[7] The court also reviewed a 2016 case, Glatt v. Fox Searchlight Pictures, Inc.,[8] that analyzed whether college students serving as interns should be paid. The trial court in Johnson found that the allegations of the students with respect to the time they spent, their lack of control over how they spent their time, and several other of the factors involving interns, could meet the test for employee status, and that dismissal was inappropriate. The NCAA and college defendants asked the trial court to certify its ruling for an interlocutory appeal, rather than waiting until the trial court had ruled on the merits, and that court did so.[9] The appellate court agreed to hear the appeal.

On July 11, 2024, the U.S. Court of Appeals ruled 3-0 that the students could proceed with their case.[10] The appellate court rejected the “amateurism” defense, and agreed with the trial court’s denial of the motion to dismiss, although for other reasons, finding that the students might be able to provide sufficient evidence to meet the FLSA requirements for employee status. The appellate court found that the trial court’s use of the test for interns was erroneous, but affirmed the trial court’s ruling on different grounds. The appellate court said that the Glatt test did not control this set of facts because interns are learning skills that relate to their academic training, while intercollegiate athletics did not relate to the students’ academic curriculum. The court noted that time spent in required athletics activities actually was detrimental to the students’ academic performance because the time and scheduling requirements interfered with their choice of courses and, in some cases, their choice of majors.

Referring to earlier cases involving the determination of whether a particular individual or set of individuals were “employees” entitled to FLSA protections, the appellate court created a four-part test:

1. Whether the individual(s) perform services for another party;

2. Whether the services are necessarily and primarily for the other party’s benefit;

3. Whether the individual(s) are under that party’s control or right of control; and

4. Whether the services are performed in return for express or implied compensation or in-kind benefits.[11]

The court added: “The touchstone remains whether the cumulative circumstances of the relationship between the athlete and the college or NCAA reveal an economic reality that is that of an employee-employer.”[12]

It is likely that this litigation will be protracted because the stakes are so high and the arguments are so novel. A ruling that Division I intercollegiate athletes are employees could potentially entitle them to additional protections under other employment laws, such as worker’s compensation, employment discrimination laws, collective bargaining laws, or Social Security requirements, to name a few. For colleges and universities, determining which laws may apply, and whether a particular issue involves the athlete’s status as a student or as an employee, could be complicated. The application of laws affecting intercollegiate athletics has changed dramatically in just a few years, and it is quite likely that more change will come. 

For any questions on how this information may affect your institution, please contact Barbara A. Lee, any attorney in Bond’s higher education practice or the Bond attorney with whom you regularly work.

[1] Alston v. NCAA, 141 S. Ct. 2141 (2021).

[2] NLRB, Statutory Rights of Players at Academic Institutions (Student-Athletes) under the National Labor Relations Act, General Counsel Memorandum 21-08, September 29, 2021.

[3] On February 5, 2024, a NLRB Regional Director ruled that the players on Dartmouth College’s varsity basketball team were employees under the NLRA’s definition, and ordered the College to bargain with the union representing these players. Trustees of Dartmouth College, Case No. 01-RC-325633 (February 5, 2024). The players voted to be represented by a union later that spring.

[4] Kristi Dosh, “10 Things to Know about the NCAA’s House Settlement,” Forbes, May 24, 2024, available at https://www.forbes.com/sites/kristidosh/2024/05/24/10-things-to-know-about-the-ncaas-house-settlement/

[5] Johnson v. NCAA, 2024 U.S. App. LEXIS 16953 (3d Cir. July 11, 2024).

[6] Johnson v. NCAA, 556 F. Supp. 3d 491 (E.D. Pa. 2021).

[7] U.S. Department of Labor. Fact Sheet #71: Internship Programs Under the Fair Labor Standards Act, January 2018. https://www.dol.gov/agencies/whd/fact-sheets/71-flsa-internships.

[8] 811 F.3d 528 (2d Cir. 2016).

[9] 2021 U.S. Dist. LEXIS 246324 (December 28, 2021). An interlocutory appeal is an appeal of a ruling that is not final; its purpose is to resolve an unresolved matter of law prior to a ruling on the merits of a case.

[10] Although all three judges supported the outcome of the case, one judge, in a concurring opinion, stated that he disagreed with the reasoning of the case, but not its outcome.

[11] Johnson v. NCAA, 2024 U.S. App. LEXIS 26953 at *30.

[12]  Id.

On July 8, 2024, the U.S. Department of Education’s Office for Civil Rights (OCR) announced that it had reached a resolution agreement with Brown University. This action followed an investigation concluding that Brown University had failed to comply with Title VI of the Civil Rights Act of 1964 regarding 75 reported antisemitic and Islamophobic incidents between October 2023 and March 2024 despite the University’s “notable proactive steps to support a nondiscriminatory campus environment, including updating its relevant policies and procedures in February 2024.”

Title VI Requirements and OCR Findings

Title VI mandates that institutions receiving federal funding must protect students from discrimination based on race, national origin, or shared ancestry. Colleges and Universities are required to take measures to end, eliminate, and prevent discrimination and harassment upon receiving reports. Recently, OCR has asserted that compliance with Title VI requires a more vigorous and methodical approach and many institutions previously employed.

In an outcome letter accompanying the resolution agreement, OCR expressed concerns highlighting what it described as the University’s inadequate response to some discriminatory incidents. Specifically, OCR concluded that offices involved in handling complaints had inconsistent responses and that some responsive processes were terminated if a reporting party did not reply to an initial outreach email. OCR found that this was inconsistent with the University’s obligation to assess whether a hostile environment exists independently of a complainant’s continued involvement.

Furthermore, despite commending Brown’s efforts, OCR criticized the revised policies and procedures for their lack of clarity in addressing and resolving antisemitic or other ancestry-based discrimination. OCR also questioned whether the University had reassessed Fall 2023 reports of antisemitism and other shared ancestry discrimination predating the policy revisions to determine whether further actions were required to comply with Title VI.

Resolution Agreement and Action Items

The University and OCR agreed on a Resolution Agreement outlining five “Action Items”:

Policy Revisions: The University must further revise its policies and procedures to enhance and ensure consistency in responses to discrimination allegations and clearly communicate these responses to students and faculty.

Annual Training: Brown will conduct annual nondiscrimination training for all employees and students. This training will include a specific section addressing discrimination and harassment based on national origin, with concrete examples.

Detailed Recordkeeping: The University is required to maintain detailed records of all complaints alleging discrimination, including harassment based on national origin.

Review: The University will conduct a review of its response to complaints and reports of antisemitic and other shared ancestry discrimination during the 2023–2024 and 2024–2025 academic years, and take remedial actions if required.

Climate Assessment and Action: Brown will analyze the results of any Title VI assessments conducted and, by the end of the Fall 2024 semester, identify and implement actions to improve the overall campus climate.

Readers who have been following OCR’s recent Title VI enforcement actions will find all of these requirements familiar and all institutions should consider implementing similar measures in order to reduce risk and bolster Title VI compliance. 

Conclusion

The resolution with Brown University is the fourth such agreement OCR has reached regarding allegations of shared ancestry violations of Title VI since the onset of the Israel-Hamas conflict. Similar complaints have led to OCR resolutions with City University of New York, University of Michigan, and Lafayette College. These agreements, alongside recent OCR guidance—including a Dear Colleague Letter and Fact Sheet—underscore OCR’s amplified commitment to enforcing Title VI compliance.

Educational institutions should take note of the detailed requirements outlined in these settlements, including robust complaint response, comprehensive training, meticulous recordkeeping, and proactive climate assessments.

For any questions on how this information may affect your institution, please contact Seth Gilbertson, any attorney in Bond’s higher education practice or the Bond attorney with whom you regularly work.

*Special thanks to Summer Law Clerk Grant Haffenden for his assistance in the preparation of this memo.

On July 2, 2024, the U.S. Department of Education’s Office for Civil Rights (OCR) released a new Fact Sheet. This document aims to help faculty, staff, students and families understand their rights and obligations under Title VI of the Civil Rights Act of 1964. Title VI prohibits discrimination based on race, color or national origin, including shared ancestry or ethnic characteristics. Nearly all public elementary and secondary schools, as well as public and most private colleges and universities (IHE), are subject to Title VI due to their acceptance of federal financial assistance, such as federal financial aid.

Harassing Conduct and Hostile Environments

OCR determines that a hostile environment exists when harassing conduct is both subjectively and objectively offensive, and so severe and pervasive that it limits or denies a person’s ability to participate in or benefit from the recipient’s education program or activity. Harassing conduct can include verbal abuse, physical assault, graphic or written statements, or other conduct that is threatening, harmful or humiliating. Such conduct can occur in various places beyond the classroom, including residence halls, athletic fields, locker rooms or online.

Establishing a Title VI Violation

For a Title VI violation to be established, OCR must find that:

1. A hostile environment based on race, color or national origin existed.
2. The IHE had actual or constructive knowledge (knew or should have known) of the hostile environment. IHE officials can become aware of harassing conduct through formal complaints, observations by employees, or awareness shared by community members or the media.
3. The IHE failed to take prompt, effective, and reasonably calculated steps to end the harassment, eliminate the hostile environment and its effects, and prevent recurring harassment. OCR assesses the reasonableness, timeliness, and effectiveness of a IHE’s response, emphasizing that an appropriate response must fully address the specific problems caused by the harassment.

Examples of Harassing Conduct

OCR provides additional hypothetical examples[1] of situations where an investigation could be initiated for IHE receiving federal financial assistance:

1. Students repeatedly using racial slurs, mocking Black power, and creating the "Kool Kids Klub" (KKK) with a displayed confederate flag. The IHE, after interviewing the students involved, takes no further steps and advises the reporting students that there is no concern.
2. A Lebanese student files a harassment complaint alleging discriminatory treatment in a clinical placement. The IHE does not investigate, claiming it is out of their hands since the incidents occurred at the clinic.
3. An indigenous student on a football team is mocked as "the Redskin" with videos posted involving a fake ritualistic Native chant. The student informs the principal, but the only action taken is a warning to the football coach to control his players.

Conclusion

The Fact Sheet clarifies for IHE officials what constitutes harassing conduct and how the OCR assesses Title VI violations. It is crucial for IHE officials to take appropriate steps when aware of harassing conduct, either through formal complaints or other means. Failure to act can lead to further OCR involvement and potentially result in the loss of financial assistance from the Department of Education.

For any questions on how this information may affect your institution, please contact any attorney in Bond’s higher education practice or the Bond attorney with whom you regularly work.

*Special thanks to Summer Law Clerk Grant Haffenden for his assistance in the preparation of this memo. 

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[1] The Department released a Dear Colleague Letter in May 2024 that also contains hypothetical examples.

A federal judge in Texas has issued a nation-wide injunction blocking the Education Department’s new minimum clock-hour rule (Proposed Rule) for career prep programs, which was scheduled to go into effect on July 1, 2024.

Read More >> Federal Judge Blocks Education Department’s New Minimum Clock-Hour Rule

Recent resolution agreements between the U.S. Department of Education’s Office for Civil Rights (OCR) and the University of Michigan (U-M) and the City University of New York (CUNY) offer valuable lessons for colleges and universities nationwide. These agreements, addressing complaints of discrimination based on shared Jewish, Israeli, Palestinian, Arab, Muslim, and/or South Asian ancestry and/or the association with these national origins/ancestries, reflect OCR’s evolving standards for compliance with Title VI of the Civil Rights Act of 1964. Higher education institutions should heed these lessons to avoid and/or neutralize regulatory scrutiny.

Read More >> OCR Resolves Title VI Complaints Against Two High-Profile Universities

On May 30, the U.S. District Court for the Southern District of New York granted New York University’s (NYU) motion to dismiss in a lawsuit[1] from a first-year law student claiming that NYU School of Law’s process for selecting students to serve as editors of its Law Review gives preference to women and minorities in violation of Title VI of the Civil Rights Act of 1964 and Title IX of the Education Amendments of 1972. The complaint was dismissed without prejudice on two grounds: 1) lack of subject-matter jurisdiction; and 2) failure to state a claim. This lawsuit is the first legal challenge to a law review diversity policy following the U.S. Supreme Court’s decision in Students for Fair Admissions, Inc. v. President & Fellows of Harvard College (SFFA), 600 U.S. 181 (2023), which struck down race-based admission processes at colleges and universities.

Factual Background

The complaint filed in October 2023 notes that prior to the Supreme Court’s decision in SFFA, the NYU Law Review would invite 50 students from the rising second-year class to join the academic journal as editors. Twelve of the 50 spots were filled by the Law Review’s Diversity Committee, which required applicants to submit personal statements and gave them the option to submit resumes. The Diversity Committee selected students in consideration of factors that included (but were not limited to) the applicant’s “race, ethnicity, gender, sexual orientation, national origin, religion, socio-economic background, ideological viewpoint, disability, and age.”

According to the plaintiff, a student identified as “John Doe,” NYU Law Review changed its website after the SFFA decision by removing any explicit reference to diversity in the membership-selection process, but it is clear “that ‘diversity’ remains a prime consideration in the selection of members.” Doe alleges that the Law Review currently requires applicants to submit a “statement of interest” for consideration by the academic journal’s Selection Committee and gives students the option to also submit a resume.

Doe claims that as a heterosexual white male, the application process will subject him to race and sex discrimination and deny him “an equal opportunity to compete for membership” when he applies for Law Review in the summer of 2024. Specifically, Doe asserts that the Law Review uses statements of interest and resumes to “give preferential treatment to women, non-Asian racial minorities, homosexuals, and transgender people when selecting its members.”

The Court’s Reasoning

First, U.S. District Judge Vernon S. Broderick determined that Doe lacked the necessary standing to bring his lawsuit. The court explained that Doe’s allegations concerning what information students may share with the Law Review in their applications or how that information may be used are speculative and cannot confer standing upon Doe. The court further stated that the complaint is “devoid of any factual support” for Doe’s arguments, as it “does not plead, in other than a conclusory way, how the Law Review is discriminating now or will discriminate in the future.” Doe’s failure to plead factual allegations of a discriminatory selection process implemented by the Law Review established no injury-in-fact, and therefore no basis for standing or the court’s exercise of subject-matter jurisdiction over the case.

Even if Doe had standing to bring his suit, the court held that the complaint would still be dismissed for failure to state a claim under Title VI and Title IX because Doe’s claim lacked “facts supporting his allegation that NYU is giving and intends to give preferential treatment to certain minority groups.” The court added that the Law Review’s commitment to diversity pre-SFFA, and even post-SFFA, is not unlawful:

"Considering the lack of any language in the selection policy demonstrating a preference for students of a protected class and the absence of any allegations supporting the inference that the selection policy would result in preferential treatment of such students, I cannot conclude that the Law Review’s continued commitment to diversity gives rise to a plausible inference of unlawful conduct."

In effect, this SDNY opinion reinforces the holding in the Supreme Court’s decision in SFFA to expressly acknowledge that universities may consider an individual’s lived experiences or socio-economic challenges in its admission processes, as long as it does not do so based on race or any other protected characteristic alone.

As of the date of this memo, it is unclear whether this case will be appealed to a higher court. Bond will continue to closely monitor this and related affirmative action cases for updates and bring them to you in a timely manner.

If you have any questions about the implications this case may have for your institution, please contact any attorney in Bond’s higher education practice or the attorney at the firm with whom you are in regular contact.

*Special thanks to Associate Trainee Camisha Parkins for her assistance in the preparation of this memo. Camisha is not yet admitted to practice law.

[1] John Doe v. New York University, 1:23CV10515-VSB-SN (S.D.N.Y. 2023).